Role of Unemployment insurance in Sustainable development in Vietnam: Overview and policy implication

Abstract

Unemployment insurance is one of the social policies that have received much attention from economists in many countries over the past decades. Since 1986, the Vietnamese economy was shifted from the centrally-planned economy to a market one leading to a very fast development of the labor market. Having a young population structure, so the unemployment problem and unemployment insurance policy had considered and recognized as the important social issues in this country. In Vietnam, the unemployment insurance policy is an important part of the Social Insurance Law, promulgated in 2008. Our paper aims to analyze the role of unemployment insurance in Vietnam since this policy officially began in 2009. The Vietnamese government has some targets in the formation of the unemployment insurance fund is the maintenance of regular compulsory contributions of parties to labor relations in combination with public budget supports, focusing on creating a stable financial funding for unemployment insurance regime in the long run. Our regression results using the Ordinary Least Squares (OLS) method and the analysis descriptive statistics show that the unemployment insurance policy has a positive effect on reducing faster and stabilizer the unemployment rate of the Vietnamese economy (this policy have reduced the average unemployment rate by 0.66% per year since 2009). Furthermore, the unemployment insurance policy not only helps the unemployed people stabilize their lives but also provides more opportunities for them to faster continue participating in the labor market by many benefits including free counseling services, free employment placement services, free training services for unemployed people in Vietnam. The success of the unemployment insurance policy has been noted in reducing the number of labor strikes by softening the relationship between employers and their workers in Vietnam. Besides, the unemployment insurance policy will help reduce the fluctuations of the economic cycles automatically by increasing the aggregate demand by multiplier mechanic and contributes to support the economic growth in Vietnam in the period 2008-2010. We can conclude the benefits of unemployment insurance help the development of Vietnamese society towards sustainability in the long run. Finally, the article also suggested some policy implications for the policymakers to have a better control the unemployment as well as stabilize the labor market in Vietnam in the future.